NZ dollar climbs near 18-month high vs. Aussie

Feb. 1
(BusinessDesk) - The New Zealand dollar climbed near an
18-month high against its Australian counterpart as the
fortunes for the neighbours pall, while looking rosier on
this side of the Tasman.

The kiwi climbed as high as
80.93 Australian cents, the highest since August 2011, and
traded at 80.81 cents at 5pm in Wellington from 80.31 cents
yesterday. The currency was unchanged at 84.10 cents from
8am and up from 83.67 cents yesterday.

New Zealand is
becoming a more attractive destination for investors looking
for higher yields, with the Reserve Bank looking more likely
to hike or maintain rates at current levels, while its
Australian counterpart has an easing bias. That comes as the
local economy is set to get a boost from the looming
Canterbury rebuild, while Australia's mining boom continues
to come off its peak. The yield on New Zealand's 10-year
government bonds is almost 26 basis points higher than its
Australian equivalent at 3.77 percent.

"I really do think
the Christchurch rebuild will lead to a rise in rates
quicker than other people do," said Tim Kelleher, head of
institutional FX sales NZ at ASB Institutional in Auckland.
The kiwi/Australian cross is "undervalued" he said. "I see
it heading up towards 85 (Australian) cents," though that's
not ASB's official view, he said.

The Australian dollar
also took a hit from slightly weaker Chinese manufacturing
figures than expected, with the nation's economy more
closely linked than New Zealand to China's fortunes. The
Australian dollar fell to US$1.0401 at 5pm in Wellington
from US$1.0442 before the announcement.

The kiwi's rally
comes after the Reserve Bank held the official cash rate at
2.5 percent yesterday, and a speech by governor Graeme
Wheeler today, which again played down the bank's ability to
influence the currency in a low interest rate
environment.

Figures published this week showed the
Reserve Bank sold a net $199 million of kiwi dollars in
December, which has been seen as the RBNZ taking a punt on
the currency running out of steam.

Investors largely
ignored flat migration numbers for December, which showed a
slowing pace of annual net migration out of New Zealand, and
will be looking at US employment figures out on Friday in
Washington.

The kiwi dollar climbed to 77.21 yen at 5pm
in Wellington from 75.87 yen yesterday, and increased to
61.78 euro cents from 61.50 cents. It rose to 53.01 British
Pence from 52.80 pence yesterday.

The trade-weighted index
advanced to 75.64 from 75.06 yesterday. The TWI rose as high
as 75.82, and is trading near the 77.17 peak in mid-2007,
when the Reserve Bank last intervened.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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